Interview: Mohaddes elaborates on National Iranian Oil Company exploration projects
Source: Iran Energy Focus
With nearly 17 per cent of the world's gas reserves and 9 per cent of its
oil reserves, Iran lays claim to a large number of untapped and unexplored oil
and gas fields, which have the potential to attract international oil companies
(IOC) to the country. In its new year budget law, approved in February, Iran
tried to give an incentive to oil exploration by offering development projects
to contractors that successfully carry out exploration of a given
This plus a new round of Persian Gulf exploration
projects are among the topics that Iran Energy Focus explores in an
interview this month with National Iranian Oil Company (NIOC) exploration
director Seyed Mahmoud Mohaddes. Mohaddes is a leading technocrat in the
NIOC and has successfully secured the involvement of a number of foreign oil
companies in exploration activities in Iran. He holds a BSc in Mines and
Engineering from Tehran Polytechnic University (1979) and has been a part of
Iran's oil apparatus since 1982. During 1993-97 he served as deputy director of
exploration at NIOC and took over the directorship in
Could you please tell our readers more about the current exploration projects
underway in Iran?
For the time being, we have three types of exploration projects. The first type
is carried out in full B
financed, designed, and operated B
by our own in-house teams at the Exploration
The second type is what we call a "joint study" project. In this type of
project directorate staff and foreign companies team up to work on a defined
block and carry out various geological and geophysical studies. We usually agree
to pay for the local currency expenses of the project, while the foreign side
pays the hard currency costs.
Fortunately, we have had successful cooperation with foreign companies in
these types of projects. We had cooperation with Norsk Hydro in Abadan
Plain, and with TFE, OMV, Edison Gas, Statoil, and Repsol in the
Persian Gulf and the Sea of Oman. We also had a number of onshore projects as
well. Our exploration studies with BP have already been completed and the
final report is being prepared. We also had joint exploration studies with
German RWE and Australian Santos, which were aimed mainly at
examining Iran's oil and gas potential.
In the third type of contract, the contractor runs the risk for
exploration of a block, i.e., it funds the exploration project of the field and
NIOC does not guarantee existence of oil in the block. A project of this
nature will be carried out in an area where the probability of finding oil is
Five contracts of this type have been concluded thus far. Norsk Hydro is
exploring Anaran block west Iran, OMV is working on Mehr block southwest Iran,
Edison and its partners are studying Munir block in southwest Iran, Chinese
Sinopec is exploring Zavareh Kashan block in central Iran, and an India
consortium of ONGC is exploring the offshore Farsi
As for our own activities, we have six drilling rigs for exploration and
plan to drill eight to ten exploration wells a year. We have already secured
contractors for our different seismic studies, including a 3D seismic in
Azadegan-Kushk and one in Abadan Plain. We had a joint study with Norsk Hydro in
Abadan Plain, but we came to the conclusion that the area needed further seismic
exploration and we are shooting a new seismic study in a vast area of 4,300
kilometres in the Abadan Plain. We also have two projects in hand in the
mountainous areas of Kazeroun and Tang-e Bijar.
Let us move to a recent call for tender for exploration of eight blocks in
the Persian Gulf. Does this round of tenders follow your Persian Carpet 2D
studies, or is it of a different nature?
the past years, we had sporadic seismic studies in the Persian Gulf area and we
needed a comprehensive study of the area. So we planned a 2D seismic project
called PC 2000 and the contractor [Norway's GGS] later agreed to extend
it to the Sea of Oman.
The area covered 105,000 kilometres, and by the end of the previous year
(ended 20th March 2003) we had managed to complete at least 104,000 kilometres
of the seismic study. It was a very successful project and for the first time we
could cover all Persian Gulf areas, including deep-water, shallow-water,
islands, and even the northern part of the Gulf.
Based on the data collected through PC 2000, we defined the so-called
"joint studies" with foreign firms. We covered the Sea of Oman and Hormuz Strait
in a joint study with Statoil and had cooperation with Repsol, OMV, and Norsk
Hydro for Persian Gulf studies. Along with these projects, the Exploration
Directorate formed its own working group to analyse the data with a look at not
only the bending structures but also the stratigraphic
These joint studies suggested that new exploration projects could be
carried out in the Persian Gulf. Based on the results we divided the region into
eight blocks for the first round of exploration projects: Bushehr (8,960
km2), Iran Mehr (6,004 km2), Dayyer (8,326
km2), Hamoun (7,774 km2), Alvand (9,776 km2),
Forouz (8,633 km2), Tousan (6,321 km2), and Larak (4,920
So far, Norwegian Hydro Zagros, Italian Edison Gas, Spanish
Repsol, Austrian OMV, Vietnamese PIDC, Thai PTT, Malaysian
Petronas, Brazilian Petrobras, and Italian Agip Iran have
bought the tender documents and there's still room for other companies to buy
the documents. The deadline for submission of bids is 26th
We have heard that the tender has not been attractive enough. How, in your
opinion, was the response to the tender?
Well, at this stage, gauging by the number of tender documents purchased, we
have received a good response. A lot of companies have bought the documents. How
many of those are actually going to go out and bid on the tender is something
As you know companies are not very much interested in exploration
projects in isolation and want the exploration plus the development project
together. Unlike many other countries, where the projects are awarded in PSA
schemes or service contracts, Iran has limitations in offering lucrative
contracts, especially in the Persian Gulf.
Speaking about exploration/development contracts, we had a recent budget
approval in that respect. Talking to the Majlis Energy Commission chairman we
learned that Iran would focus mainly on its border-straddling fields. The
managing director of NIOC, however, said in a March interview that central areas
would be prioritised in the exploration activities of Iran. Could you please
clarify these two seemingly contradictory
order to cover all the sedimentary fields of Iran, we need to extend the
coverage of our exploration activities to the whole of the country. Up until
now, we have been concentrating our activities in the oil-rich area of the
Persian Gulf and the provinces of Ilam, Kohkilouyeh-Boyerahmad, Khuzestan, and
Bushehr. Needless to say there is still plenty of oil waiting to be found in
these areas. Because we have not embarked on any form of advanced exploration
activity in some parts of the country, however, particularly those with high
levels of poverty, we thought it prudent and beneficial to adopt a more
encouraging scheme for exploration activities in these areas. In the budget
bill, the Majlis therefore authorised us to offer exploration and
development contracts across Iran that fall outside the regions of the Persian
Gulf and the provinces of Ilam, Kohkilouyeh-Boyerahmad, Khuzestan, and Bushehr.
These contracts can serves as both an attractive incentive for foreign companies
and a means of accelerating economic development in the intended
Where would you focus your activities, on the border areas or on the central
parts of the country?
have defined about 50 blocks for exploration but will definitely need to
prioritise them and offer them in a series of different tenders. Border areas
will be our first priority, but this does not mean that a region in central Iran
in desperate need of oil and gas would be dropped from our priority list. For us
all parts of the country are important, including Sistan-Baluchestan, Mokran,
Moghan, and so forth. So for the time being we are studying these blocks and
ranking them for the first round of tenders.
Back to our previous question about the exploration/development awards, does
this new law apply to exploration contracts already
No. This law does not apply to these contracts. We believe that the explorer of
a field can submit the best bids from both a financial and a technical
perspective since they have been intimately involved in the exploration process.
If the contractor fails to win the tender, however, we grant them a 30 per cent
share in development projects as the "explorer
Let us suppose a case in which an exploration contractor successfully carries
out its duties and finds oil in the block. Will NIOC immediately sign a buy-back
deal with the contractor or will Iran consider its OPEC constraints and quotas
for development of the field?
are many factors involved in our decision-making process. One of the reasons why
we are delaying the offer of the blocks is in fact to study all aspects of the
project, including the issues you pointed out.
We want to offer blocks that have high chances of oil and are also
located in the areas where there's a need for production of the oil. If we
manage to find a gas field in Sistan-Baluchstan, for example, we will not
hesitate to award the contract to tap into the reserves as soon as
So, when do you think you will put on tender the 50 defined blocks? How many
of blocks are you going to offer in your first
We hope to make the first offer in four or five months, but the number of blocks
is not yet determined.
Do you hope to close a deal by the end of the current Iranian year (March
Well, I don't know. We hope to collect the bids two or three months before year
end and if we manage to shorten our negotiations with the companies we will get
close to a deal by the end of the year.
As you mentioned earlier, exploration projects are not naturally attractive
to foreign companies. Does the Exploration Directorate have any plans to make
the projects more attractive?
have always tried to accept the reality. We know that companies want long-term
activities in a country and that is why we have initiated the "explorer share"
in our contracts. As I said before, the 30 per cent share is a part of our plans
in the five exceptional areas and the new exploration/development scheme is set
for other parts of the country. We believe that these measures will give a
better incentive to bidders, and I have to point out again that all the
exploration projects we have offered so far have had a high chance of oil
What role do you think local companies can play in these exploration
projects? Do you think they can have an active participation or
our recent tenders we invited both Iranian and foreign companies, and the
criterion for ultimately choosing the contractor was the approval of our
technical committee. But we all know that exploration projects carry high risks
and local companies frequently lack sufficient financial backing. No Iranian
company has so far expressed interest in the eight blocks on offer and I think
that is because they are not particularly aware of the mechanisms involved in
agreements of this nature and they lack solid financial backgrounds. But I have
to point out that even foreign contractors will have a major part of their
activities done by domestic service companies.
What type of companies do you prefer to work with? We have been hearing that
Iran is more interested in working with medium-sized companies rather than oil
giants. Is that true?
we have no limitation as such. We want to cooperate with any company with
approved technical abilities. But big companies look for big contracts.
Exploration projects are usually in the range of $70-$100 million and are not
interesting to giant companies. And of course, big companies usually cost more
than smaller ones.
We have been told that Iran has never gone for gas exploration projects, and
all its discovered gas fields were found during the search for oil. Do you have
any plans for gas discovery?
priority is with oil and that is mainly because of its important features and
also our large gas reserves already in hand.
As our last question, what plans do you have for the Caspian Sea
We had joint studies with Shell, Lasmo, and Veba and we carried
out 2D seismic on the sea. We are now expecting to kick off our 3D seismic
within two months. We are also improving our technical capabilities for drilling
in the deep waters of Caspian, our logistic vessels are being built, and our
semi-submersible rig is being constructed. We hope to start drilling by the end
of the next Iranian year (March 2004-March 2005).
Thank you very much.
... Payvand News - 4/21/03 ... --